Correlation Between Pernod Ricard and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and Legrand SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pernod Ricard and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pernod Ricard SA and Legrand SA, you can compare the effects of market volatilities on Pernod Ricard and Legrand SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pernod Ricard with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and Legrand SA.
Diversification Opportunities for Pernod Ricard and Legrand SA
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pernod and Legrand is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Legrand SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA and Pernod Ricard is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pernod Ricard SA are associated (or correlated) with Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Legrand SA go up and down completely randomly.
Pair Corralation between Pernod Ricard and Legrand SA
Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Legrand SA. But the stock apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 1.23 times less risky than Legrand SA. The stock trades about -0.36 of its potential returns per unit of risk. The Legrand SA is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 10,580 in Legrand SA on August 28, 2024 and sell it today you would lose (1,064) from holding Legrand SA or give up 10.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pernod Ricard SA vs. Legrand SA
Performance |
| Timeline |
| Pernod Ricard SA |
| Legrand SA |
Pernod Ricard and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pernod Ricard and Legrand SA
The main advantage of trading using opposite Pernod Ricard and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pernod Ricard position performs unexpectedly, Legrand SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Legrand SA will offset losses from the drop in Legrand SA's long position.| Pernod Ricard vs. LOreal SA | Pernod Ricard vs. Danone SA | Pernod Ricard vs. Compagnie Generale des | Pernod Ricard vs. Air Liquide SA |
| Legrand SA vs. Publicis Groupe SA | Legrand SA vs. Pernod Ricard SA | Legrand SA vs. Compagnie Generale des | Legrand SA vs. Compagnie de Saint Gobain |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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